BluefoxToday blog : July 2007

Mortgage lenders listen to Wall Street

Ever since last winter, or maybe even earlier, the politicians across the land, consumer groups and many others involved in the residential real estateindustry have been talking about how to handle the subprime home loan mess. The Feds have put together task groups to draft new rules and multiple congressional hearings have been held on what type of regulations would be needed. Plenty of manpower, and a lot of time, has been spent on the issue in the last several months.

The effort has finally produced some visible results. In the past month federal and state regulators have separately published their new, more demanding guidelines that cover just about all mortgage originators. A few states are still dragging their feet on it, but are expected to eventually come on board. However, there is one large problem with the guidelines. That's exactly what they are, mere guidelines. They are not enforceable directives. You mean to tell me that all the work was done to just produce some recommendations? Yes. That's true.

Don't worry, though. The subprime tangle is being corrected as we speak. And the one who is doing it is the marketplace. When everybody else was debating what should be done, the Wall Street quietly took charge of the issue and went about fixing it on its own. How is it doing it? The mortgage bankers on Wall Street simply changed the lending guidelines, made them tougher. See, the institutional investors stopped buying mortgage-backed securities on the secondary market underwritten by the old, lenient rules because they were going bad. So, the guidelines had to be adjusted to satisfy the investors. It was just a prudent business decision. That's all.

In essence, when you look at the big picture, the marketplace has been way ahead of the regulators to sort this thing out. In some cases lenders have even gone beyond what the recent federal and state guidelines have asked for. They want to make sure the loans they package for the secondary market will sell. 


Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 0 commentsEsko Kiuru • July 19 2007 11:45PM
Mortgage lenders listen to Wall Street
Ever since last winter, or maybe even earlier, the politicians across the land, consumer groups and many others involved in the residential real estate industry have been talking about how to handle the subprime home loan mess. The Feds have put… more
Old Las Vegas golf course sold for homes?
It's a distinct possibility. The Las Vegas National Golf Course located conveniently at Desert Inn and Eastern, the old part of town, is being sold to an unknown real estate investor with the transaction scheduled to close in August. Whoever… more
Home purchase ordeal
It's very exciting to go out in the car with the idea that you are going to look for a house to buy in the next several weeks. If it's your first one, then the heart beat is even faster, more profound. The emotional high can make your talk slur. And… more
Las Vegas land sales slow down
Looks like the good old days are gone, at least for now. It wasn't too long ago when the media headlines blared about the BLM, or Bureau of Land Management, land sale auctions in Southern Nevada that brought ever-increasing prices for an acre… more
Henderson Nevada leads $1 million club
Henderson is quietly living and thriving in the shadow of its much more famous neighbor, the entertainment capital of the world, Las Vegas. Sometimes it's easier on you when you can go about your business just off the spotlight. Everything you do… more
Subprime mortgage rules to be upgraded
It was a week or so ago when the federal mortgage market regulators distributed a new set of rules for the subprime home loan segment. It was good news, proving that the government is taking the issue seriously. But we have to remember one thing, it… more
Green housing faces challenges
The green housing concept is still trying to make a widely-accepted mark on the residential real estate industry. It has so far managed to carve itself a reasonable niche, which is encouraging, but to widen it is going to take more public education… more
Buyer's market caveat
The real estate market is soft in many areas around the country. Some predictions say that it may get even softer in the coming months in select cities, while other places show signs of the market leveling out. Anyhow, it's a bona fide buyer's… more
Mortgage leads are us
The traditional lead sources for mortgage lenders have been satisfied past customers, real estate agents, family and friends, newspaper ads, Yellow Pages and so forth. As long as you stay active, they'll work well. And then comes along the Internet… more
40-year mortgage a good deal?
Home buying can often be a highly emotional experience. It gives you a shelter that you can call your own, you can run it your way and you decide what to do with it and when. Nobody can evict you from it, either, as long as you keep making the… more